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Taxes
Franklin County has a great automated monthly prepay system for paying your real estate taxes that will pay you interest. The Franklin County Treasurer will pay the “average Joe” home owner the same interest rate that the Treasurer earns on its multi-million dollar portfolio. This is really a groundbreaking achievement for the Franklin County Treasurer’s office. The Treasurer sought and obtained a change in state law that allowed them to pay interest on monthly tax payments by home owners. Banks are still NOT allowed to pay interest on escrow accounts that collect property tax payments.
The interest rate that you can earn from the Treasurer’s office will be a better rate than most short-term bank accounts (checking, savings or money market accounts). For example, in 2007, the Treasurer’s interest rate fluctuated between 3.5% – 5.5%. Last year, I had a so called “high yield money market account” with an investment company that only earned between 1.75% – 2.25%. I think the Treasurer’s new monthly prepay system for real estate taxes that also pays interest is a first-rate service. Many homeowners in Franklin County are not even aware of this service.
A Franklin County home owner could possibly earn a couple hundred dollars a year. For example, a $265,000 home in Franklin County with yearly real estate taxes of $5,000 a year would have approximately earned $200 – $220 in an interest credit for 2007. The interest that you earn will be credited back against your real estate taxes, to LOWER your taxes! To get more info, you can visit the Franklin County Treasurer web site. The process is very simple and easy to set up. You just have to fill out one simple form.
If you are currently escrowing your real estate taxes with your lender then you will need to check with your lender to see if you are eligible to stop the escrow of real estate taxes. Most lenders will allow you to stop escrowing for real estate taxes if you have 20% – 30% equity. But, every bank has different policies and procedures, so before you do anything make sure you first check with your mortgage lender. You want to make sure you are eligible and there are no fees or costs involved to stop escrowing for your real estate taxes.
As of right now, Franklin County is the only local county in central Ohio that offers this great service. If you have questions, you can contact The Treasurer’s office for more information (614) 462-7515.
I think this is a wonderful service by our Treasurer’s office. A great benefit for being a home owner in Franklin County. You have the “worry free” convenience of automatic monthly payments of your real estate taxes that also pays you a great short term interest rate that you probably can’t get at any bank. And best of all, the Treasurer’s program is FREE. There is no fee or set up charge to join the program.
Shake Down!
Don’t let the “Tax Man” shake you down! Click here for other possible ways to reduce your property taxes and/or save some “greenbacks”!
Save Moolah!
Even a small amount ($25, $50, $100) added to your mortgage payment each month when applied to the principal can have a significant impact on the total amount of interest you pay as well as how long you pay it.
For example, if you divide your monthly mortgage payment by 12 and add that amount to your monthly payment each month by the end of the year you will have paid the equivalent of an extra mortgage payment for the year—a 13th payment—all invested in principal reduction!
That 13th payment can make a big difference. For example, let’s say you borrowed $200,000 at 6.5 percent interest with a 30 year term. Your monthly payment would be a shade over $1,264 a month for principal and interest. By adding an extra $100 per month ($1,200 per year) you would pay off your mortgage in just over 23 years, knocking almost seven years off the loan and saving over $73,000 in interest.
Contact your lender to find out how they apply extra payment money from you. Some lenders may apply your extra money that you pay above your monthly payment amount automatically to your principal.
However some may appy it to your escrow account to pay taxes or insurance which is NOT what you want them to do! Make sure you read the fine print, and call (or write) your lender to confirm what they will do, or how you can assure that the extra money goes to reducing your principal balance.
Tip: Sending a separate check and clearly marking the “memo” field with your loan account and the phrase, “Apply to Principal”will help assure proper credit and provide strong documentation of your extra payments. Again, check with your lender.
Tip: Don’t bother with offers from your lender or 3rd party companies that offer to charge you money (often as much as $200-$300) to set up a bi-weekly payment program—you can accomplish the same thing yourself without their help—for free.
IMPORTANT NOTE: Although this is a great strategy to accomplish the twin goals of saving money and increasing equity in the capital asset that is your home, this may not be the best use of your financial resources.
Interest rates for home mortgages tend to be lower than most other consumer loans and your financial profile may suggest a better use for this money—like paying off higher interest consumer loans first.
Anytime you pre-pay extra money on any installment loan it has the same effect as investing your money at that interest rate. So if you had an extra $100 should you pre-pay it on a home loan at 6.5% or a consumer loan at 10%, for example? And don’t forget that mortgage interest is usually fully tax deductable, whereas other consumer interest is not.
Therefore, we recommend consulting a qualified financial advisor for a proper evaluation of your total financial picture before proceeding with this strategy.
(This money saving blog story was reproduced from the “Buyershome Journal” blog – April 12, 2007)
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